Old, new players must share the mobile TV pie

Arvind Venkateswaran
04 Apr 2011

The Asia-Pacific will generate a cumulative $31 billion from 250 million mobile-video-service subscribers by the end of 2014, latest statistics by Pyramid Research show.

Another analyst firm, RNCOS, says the region will account for 67% of the global mobile-TV subscribers by 2013. With such forecasts, why have adoption and usage of mobile-video services so far failed to live up to expectations, with operators and content providers suffering continuing losses?

While operators, technology/content providers and handset manufacturers have largely overcome technological hurdles to launching mobile TV, they are now left with the task of ensuring the successful implementation and take-up of mobile-video services.

These parties have yet to agree upon a sustainable business case which adequately rewards each for their investment. The rollout of mobile TV has forced two camps with seemingly divergent sets of goals – broadcasters and “new media” (operators, content providers and handset manufacturers) – to work together.

While traditional media is limited to the TV and radio broadcast industries maintaining control over programming rights and demanding minimum guarantees, the model doesn’t fit the “new media” paradigm.

Operators spent billions upgrading to 3G and 4G networks that they need to monetize. Content providers, and especially rich-data services such as video, are a key component of driving ARPU. But minimum guarantees demanded by the content providers make profitability near impossible for a network operator facing very high capex.

Mobile operators need to make sure they can monetize rising demand for mobile video, particularly given the huge strain that bandwidth-rich video and streaming television can put on a mobile network.

Also, technology and content providers need to be compensated. Mobile apps providers are usually young companies working on small budgets but bringing out innovative and cutting-edge mobile apps. They spend millions developing new technology and it is an impossible proposition for most to adhere to hefty minimum-guarantee licensing deals.

Demanding the same kind of premiums and payments for content licensing and rights management, as is done in the TV-broadcast business, will effectively kill the mobile-delivery business for live and premium-video content.

The bottom line is that both parties – broadcasters and “new media” – need each other, and a successful mobile TV ecosystem will require a revenue-sharing model that benefits them both. When that has been settled, the key deliverables are low-cost, video-appropriate devices as well as networks capable of delivering an enjoyable mobile-video viewing experience, and mobile-ready content.

Of course, no one will tune in if the content isn’t appealing, so getting content optimized for mobile devices, as well as understanding the type of content that users want, is essential. Operators need mobile-ready content that is easy to navigate and watch on a mobile device.

As for pricing models, unlimited data plans and per-megabit pricing have prevailed. However, the former is a tricky proposition for operators who end up subsidizing heavy data usage, while the latter is confusing for consumers who don’t generally understand the bits and bytes of bandwidth.

When AT&T first offered iPhone models bundled with the network’s subscription plans, AT&T charged a $30 monthly flat fee for unlimited data usage, alarmingly resulting in 3% of AT&T’s customers using 40% of its network capacity. To address the situation, AT&T had to re-work its pricing structure so that customers who use more bandwidth pay more for that privilege.

Singapore’s three telco giants – M1, SingTel and StarHub – offer iPhone data usage capped according to subscription plans.

But while this new iPhone data pricing brings customer pricing parity and forces heavy bandwidth users to pay more for use of the carrier’s network, the resulting per-MB pricing lacks transparency. Operators need to come up with a pricing structure for video content that is sustainable for them, and understandable for their users.

Different slices, different prices

Video content generally falls into two categories – live and archived – and must be priced differently with live content commanding a higher premium. The most likely scenario for live-content pricing is a subscription model that adequately compensates operators for the expense associated with obtaining content rights, as well as consumer-bandwidth usage. This type of pricing may be done per clip or per minute/hour of viewing, or it may be priced for broader viewing periods (weekly/monthly). On the other hand, archived content is not time-sensitive, and can be more of an ad-supported model.

The question is whether operators will be merely the channel for this rollout, or if they will be able to monetize apps running over their network as well. Many consumers simply download free or subscription-based apps and use their carrier-data plans to run them. However, carriers may choose to purchase white-labeled apps, re-brand them, and generate monthly subscriptions from these services.

Many TV consumers are “cutting the cord” from their cable provider, accessing services such as Google TV and Hulu through broadband, and watching these services on their iPad or connected TV. Others are viewing sitcoms or news and entertainment clips on their iPhone or other mobile device. Times have changed, and broadcasters, content providers, as well as mobile-network operators, must change with them.

The technology is ripe, the networks are ready, the devices are in place, pricing scenarios are viable and consumers are eager. Now, it’s up to the main stakeholders – broadcasters and the “new media” – to agree upon revenue share and watch the next generation of mobile video explode.

Arvind Venkateswaran is Geodesic GM for international business Operations and SVP for worldwide sales/business development and marketing

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